Author: Smead Capital Management

We live in a world defined by change. Anyone in doubt need only wait a few days to be reminded. Humans endeavor to measure it, describe it, and develop strategies designed to control it. Sometimes these observations persist long enough for emerging beliefs of changing paradigms or constructs. At the end of cycles, reversion to the mean gets lost as the “new normal” removes old norms from consciousness.

Printable Version Dear Fellow Investors, Michael Milken rose to the top of Wall Street by way of the Wharton Business School with Drexel Burnham Lambert in tow. Milken’s work at Wharton was founded on the core theory that bond investors were rewarded by taking junk

Over the last ten years we’ve seen the rise of the Battle Royal markets and the shift away from one-on-one investing. There are all sorts of different battle royal’s, but the ones I watched as a kid were the biggest events in pro wrestling, where 12 wrestlers were put in the ring together and they attempted to toss each other out until one wrestler was left standing. Only the winner received prize money.

We believe money always goes where it gets treated the best. A recent article detailing the most attractive places in the U.S. for millennials to buy a house included the following cities, and that has implications for investing, not just nesting:

As rates fall to zero in most of the world, the line that has been ringing in our mind is “You can check out any time you like, but you can never leave!” This is a chorus investors have sung through their capital allocations. We believe the Eagles provided an excellent understanding of what today’s market is giving investors in their song, Hotel California.

In a recent interview by CNN’s Fareed Zakaria with Bill Gates the founder of Microsoft, Gates reflected on the wizardry of Steve Jobs and his ability to “cast spells on people.” Since Gates was a tech-magnate in his own right, his “minor wizard” status gave him the ability to identify the spells Jobs cast on employees and the world at large. Gates used the example of a company called NeXT, which Steve Jobs founded and according to Gates made very expensive computers which were “complete nonsense and yet he [Jobs] mesmerized those people.” Steve Jobs succeeded in attracting attention and wonder around NeXT so effectively that Apple bought it in 1996.

There are many ways to practice value investing and many ways to add value to your stock selection. We refer to ourselves as contrarians because we do not allow the crowd fears to deter us. We believe this perspective enables us to enter at lower prices on good quality securities when there is some form of tribulation surrounding an industry or company. In today’s missive, we would like to discuss the tribulation arising out of political scrutiny and the industries and companies suffering at the hands of political football.